British consumers face iTunes price hike after tax policy change

Apple may be forced to increase the amount of Value Added Tax that it charges for iTunes music and video sales in the U.K. as Her Majesty's Treasury pushes to end tax loopholes that allow consumers to pay much lower rates on digital purchases.

The new law, backed by Chancellor of the Exchequer and Second Lord of the Treasury of the United Kingdom George Osborne, would end a policy that allows Apple to sell downloads through EU countries like Luxembourg with VAT rates as low as 3 percent. Instead, Apple would have to levy the U.K.'s full 20 percent VAT for purchases in Britain, according toThe Guardian.

"As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services," an announcement from the Treasury reads. "From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue."

The change is said to have the potential to raise government income from taxes on digital sales by as much as £300 million ($494 million) each year.